Fed govt defends 23.9pct tax revenue cap

Finance Minister Mathias Cormann has defended the coalition's decision to lock in a cap on the amount of tax revenue collected by the government.

The 23.9 per cent tax-to-gross domestic product limit will be written into the rules for Tuesday's budget, which will feature personal income tax cuts.

Senator Cormann says the "speed-limit" on the public tax burden, above which revenue is returned through tax cuts, will keep the economy strong.

"It's the long-term average," he told ABC radio on Monday.

"This is something Labor used to subscribe to."

But public policy think-tank The Australia Institute describes the cap as "entirely arbitrary".

"There is no objective reason why the government should set this cap. The objective of fiscal policy should be whatever is appropriate for the state of the economy," institute executive director Ben Oquist said.